Finance Chapter 7 2 Under Which The Following Forms Market

60.

Under which of the following forms of market efficiency would stock prices always reflect fair value?

61.

Investors are willing to purchase stocks having high P/E ratios because:

62.

Which of the following is least likely to contribute to going concern value?

63.

What happens to a firm that reinvests its earnings at a rate equal to the firm’s required return?

64.

What can be expected to happen when stocks having the same expected risk do not have the same expected return?

65.

The terminal value of a share of stock:

66.

A stock is expected to pay dividends of $1.20 per share in Year 1 and $1.35 per share in Year 2. After that, the dividend is

expected to increase by 2.5% annually. What is the current value of the stock at a discount rate of 14.5%?

67.

Jefferson’s recently paid an annual dividend of $1.31 per share. The dividend is expected to decrease by 4% each year. How

much should you pay for this stock today if your required return is 16%?

68.

Which one of the following is more likely to be responsible for a firm having a low PVGO?

69.

What is the most likely value of the PVGO for a stock with a current price of $50, expected earnings of $6 per share, and a

required return of 20%?

70.

What is the expected constant-growth rate of dividends for a stock with a current price of $87, an expected dividend payment

of $5.40 per share, and a required return of 16%?

71.

Which of the following is true for a firm having a stock price of $42, an expected dividend of $3, and a sustainable growth

rate of 8%?

72.

What is the value of the expected dividend per share for a stock that has a required return of 16%, a price of $45, and a

constant-growth rate of 12%?

73.

What is the required return for a stock that has a constant-growth rate of 3.3%, a price of $25, an expected dividend of $2.10,

and a P/E ratio of 14.4?

74.

What should be the price of a stock that offers a $4.32 annual dividend with no prospects of growth, and has a required

return of 12.5%?

75.

Psychologists have observed that:

76.

If The Wall Street Journal lists a stock’s dividend as $1, then it is most likely the case that the stock:

77.

Suzi owns 100 shares of AB stock. She expects to receive a $238 in dividends next year. Investors expect the stock to sell for

$46 a share one year from now. What is the intrinsic value of this stock if the dividend payout ratio is 40% and the discount

rate is 13.5%?

78.

What is the minimum amount shareholders should expect to receive in the event of a complete corporate liquidation?

79.

If the price of a stock falls on 4 consecutive days of trading, then stock prices:

80.

What should be the stock value one year from today for a stock that currently sells for $35, has a required return of 15%, an

expected dividend of $2.80, and a constant dividend growth rate of 7%?

81.

The required return on an equity security is comprised of a:

82.

What should be the current price of a share of stock if a $5 dividend was just paid, the stock has a required return of 20%,

and a constant dividend growth rate of 6%?

83.

What should be the current price of a stock if the expected dividend is $5, the stock has a required return of 20%, and a

constant dividend growth rate of 6%?

84.

Reinvesting earnings into a firm will not increase the stock price unless:

85.

What proportion of earnings is being plowed back into the firm if the sustainable growth rate is 8% and the firm’s ROE is

20%?

86.

How much of a stock’s $30 price is reflected in PVGO if it expects to earn $4 per share, has an expected dividend of $2.50,

and a required return of 20%?

87.

What is the expected constant-growth rate of dividends for a stock currently priced at $50, that just paid a dividend of $4,

and has a required return of 18%?

88.

According to random-walk theory, what are the (approximate) odds that a stock will increase in price after having increased

on two consecutive days of trading?

89.

If the liquidation value of a corporation exceeds the market value of the equity, then the:

90.

In a valuation of a nonconstant dividend growth stock, the terminal value represents the:

91.

Which one of the following situations is most likely to occur today for a stock that went down in price yesterday?

92.

Based on the random walk theory, if a stock’s price decreased last week, then this week the price:

93.

Research indicates that the correlation coefficient between successive days’ stock price changes is:

94.

An analyst who relies on past cycles of stock pricing to make investment decisions is:

95.

Which statement is correct?

96.

If it proves possible to make abnormal profits based on information regarding past stock prices, then the market is:

97.

Which statement is correct?

98.

Which statement is correct?

99.

Market efficiency implies

100.

If no price change occurs in a stock on the day that it announces its next dividend, it can be assumed that:

101.

When investors are not capable of making superior investment decisions on a consistent basis based on past prices or public

or private information, the market is said to be:

102.

Evidence that newly issued stocks tend to underperform the market over the following years:

103.

For corporate financial managers an important lesson of market efficiency is:

104.

When new information becomes available in the market, evidence generally suggests that:

105.

Suppose that the total value of dividends to be paid by companies in the Narnian stock market index is $100 billion.

Investors expect dividends to grow over the long term by 5% annually, and they require a 10% return. Now a collapse in the

economy leads investors to revise their growth estimate down to 4%. By how much should market values change?

106.

Your broker suggests that you can make consistent, excess profits by purchasing stocks on the 20th of the month and selling

them on the last day of the month. If this is true, then:

107.

If a firm unexpectedly raises its dividend permanently and by a substantial amount, the firm’s stock price:

108.

The statement that there are no free lunches on Wall Street suggests that:

Chapter 07 Test Bank – Static Summary